Delhi District Court
M/S Reliance Polycrete Limited vs National Agricultural Cooperative on 4 June, 2014
IN THE COURT OF MANOJ JAIN: ASJ/SPECIAL JUDGE (PC ACT) (CBI)
SOUTH DISTRICT: SAKET DISTRICT COURTS
NEW DELHI
Criminal Appeal Number : 02/2014
Unique ID No.02406R0211842011
M/s Reliance Polycrete Limited,
1504, First Floor, Wazir Nagar,
Opposite Defence Colony,
New Delhi-110003. ..................................Appellant No.1
Dr. S.K. Jain,
Chairman-cum-Managing Director,
M/s Reliance Polycrete Limited,
1504, First Floor, Wazir Nagar,
Opposite Defence Colony,
New Delhi-110003. ..................................Appellant No.2
versus
National Agricultural Cooperative
Marketing Federation (NAFED) of India Ltd.,
NAFED Building, Siddharth Enclave,
Ashram Chowk, Ring Road,
New Delhi-110014. ..................................Respondent
Date of institution of Appeal : 18.08.2011
Date on which case was received on
Transfer by this Court : 07.04.2014
Date of conclusion of arguments : 24.05.2014
Date of Judgment : 04.06.2014
Memo of Appearance
Sh. Rohit P. Ranjan, Learned counsel for appellants
Sh Krishan Nautiyal, Learned counsel for Respondent
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 1 of 15
Particulars related to impugned order
Serial No. of complaint case as per TCR : 305/10
Penal Section for which convicted : 138 of Negotiable Instruments Act
Date of order of conviction : 20.07.2011
Date of order on sentence : 21.07.2011
Name of learned Trial Court : Sh. Anuj Aggarwal,
MM-03, N.I. Act, South, Saket.
JUDGMENT
1 Appellants (accused(s) in the complaint case) have taken exception to the order of conviction dated 20.07.2011 whereby they have been held guilty for offence u/s 138 of Negotiable Instruments Act and order of sentence dated 21.07.2011 passed by Ld. Trial Court whereby they have been sentenced as under:-
i) Appellant No.1 company: Fine of Rs. 10,000/-.
ii) Appellant No.2: Simple imprisonment for a period of nine months and compensation of Rs. 24 lacs in default thereof simple imprisonment of one month and compensation amount, if not paid, to be recoverable u/s 421 Cr.P.C.
2 Appeal emanates from the criminal complaint filed by respondent M/s National Agriculture cooperative Marketing Federation of India (NAFED).
3 For the sake of convenience, I would be referring to the parties as per their nomenclature in such complaint.
4 As per averments made in the complaint, NAFED was in the business of trading of agricultural and non agricultural items like food grains, edible oils, dry fruits, spices, metal ore, metal scrap, chemical etc. Accused no.2 was Chairman-cum-Managing Director (CMD) of accused No.1 company M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 2 of 15 which was in the business of manufacturing sewing threads, export of rice, wheat, iron ore etc. He approached complainant in December, 2004 with proposal for procurement of export of iron ore and sought financial assistance of Rs. 80 crores. He assured about its sound financial condition and promised timely, diligent and honest observance of all the obligations including payment of any amount. Accordingly, an agreement was entered into between them on 31.01.2005 and financial assistance, in the shape of advance, was given to them from time to time. Accused(s) had received financial assistance of Rs. 18, 38, 75,000/- by 09.03.2005. Accused were, however, habitual defaulter and their various cheques returned dishonoured. Cheque in question i.e. cheque bearing No. 176658 dated 02.11.2005 for Rs. 16 lacs was also towards part re-payment of such financial facility but such cheque also returned dishonoured due to funds insufficient. Legal notice did not yield any result and accordingly, the complaint was filed in the court on 13.02.2006.
5 Both the accused were ordered to be summoned. Notice u/s 138 r/w 142 Negotiable Instruments Act was served upon accused No.2 S.K. Jain on 26.03.2008. He pleaded not guilty and claimed trial. Case was fixed for CE. Sh. S.K. Maggu (authorized representative of Complainant Company) was examined. No other witness was examined by complainant after the summoning of the accused.
6 Statements of accused were recorded and as per accused, though the cheque had been issued and though the same had returned dishonoured for funds insufficient yet it was not without justifiable reason. It was supplemented that some of its properties were lying mortgaged with NAFED and as per the agreement, those properties were agreed to be sold to one M/s Bimal Casting Pvt. Ltd. and such intending buyer issued a cheque of M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 3 of 15 Rs. 16 lacs in the name of the accused No.2. In turn, accused had issued cheque in question favouring complainant expecting payment from such buyer. However, since buyer wanted some clarification regarding mutation and demarcation, such cheque issued by buyer was not honoured and, therefore, the cheque in question was also not paid. In order to substantiate such stand, accused no.2 S.K. Jain entered into witness box u/s 315 Cr.P.C. and examined himself as DW1. He also examined DW2 Kanwar Singh and DW3 Homi Rajwans (official of Complainant Company).
7 It will be worthwhile to mention here that case was listed for final arguments on 07.05.2011 and that day, Ld. trial court found out that no notice u/s 251 Cr.P.C. had been issued upon accused no.1 company separately. Such notice was accordingly served to which accused no.1 company pleaded not guilty. However, both these parties also agreed that no further examination-in-chief or cross examination was required after such notice u/s 251 Cr.P.C. and agreed that the material already on record be read qua accused no.1 company also. Statement of accused u/s 313 Cr.P.C. was also recorded same day i.e. on 07.05.2011 and defence evidence, already led by accused no.2, was adopted by accused no.1.
8 Ld. Trial court, after hearing the final arguments, held both the accused guilty u/s 138 Negotiable Instruments Act and awarded sentence as already mentioned above.
9 Sh. Ranjan has contended that Ld. trial court has not taken note of various important aspects of the case including the crucial fact that the cheque in question was not in discharge of any debt or liability. He has ar- gued that admittedly accused company had approached complainant for seeking financial facility of Rs. 80 crores but the cheque in question had noth-
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 4 of 15ing to do with such facility or alleged liability arising out of any such financial assistance. It has been argued that while extending the financial assistance, NAFED had sought for a collateral security and accordingly one property situ- ated at Meerut was offered as security. Later, accused prayed for issuance of No Objection Certificate (NOC) for selling off such property against the al- leged outstanding amount of Rs. 18.38 crores. Such request was considered by NAFED and NAFED issued NOC for disposal of such collateral security vide letter dated 19.11.2005. Accused were also able to find out a buyer i.e. Sh. Aditya Sharma and such name was even disclosed to M/s NAFED. Ac- cused had issued cheque of Rs. 16 lacs in favour of NAFED as the buyer had agreed to purchase the aforesaid property of Meerut for more than 9 crores and buyer himself had also issued a cheque of Rs. 16 lacs in favour of ac- cused. However, the cheque of Rs. 16 lacs issued by such buyer could not be encashed and, therefore, even NAFED should not have gone for encash- ment of cheque in question.
10 Sh. Ranjan has also asserted that Ld. trial court did not consider the fact that it were the accused who had invoked the arbitration seeking recovery of more than Rs. 32 crores after setting off the alleged outstanding of Rs.18,38,75000/- and, therefore, the present complaint should not have been filed even. It has been claimed that there are false averments in the notice, complaint and even in the affidavit of authorized representative of complainant and during trial, defence had been able to put forward its stance very appropriately and, therefore, there was no occasion to have recorded any order of conviction.
11 It has also been argued that even otherwise the sentence passed by Ld. Trial court is highly arbitrary and unjustified. According to Sh. Ranjan even during the trial, the accused had offered to compromise the M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 5 of 15 matter and in order to show its bonafide, a draft of Rs. 16 lacs was also brought before the court but NAFED, with ulterior notice, did not enter into any compromise. It has finally been contended that when the parties were pursuing their respective claims before the Arbitral Tribunal, the court should not have, even otherwise awarded any substantive sentence of imprisonment.
12 Aforesaid contentions have been refuted and according to Sh. Nautiyal, the cheque in question was towards part liability. He does not dispute that NOC had been issued but asserts that even such NOC had been given because the accused were defaulters and made request to them as they wanted to clear the liability after selling off the collateral property. According to him, therefore, the cheque was in discharge of liability. He has also contended that at no point of time, accused had submitted any request or letter for not presenting the cheque. So much so, even the legal notice was not replied. Thus, the intention of accused was malafide from the very inception and, therefore, the trial court was fully justified in awarding substantive sentence of imprisonment as well.
13 I have given my thoughtful consideration to the rival contentions and carefully perused the trial court record.
14 It will be also worthwhile to mention here that this appeal remained pending adjudication for quite some time as parties were taking adjournment on the pretext of settlement. After the matter was received by this court, it was made abundantly clear to parties and their counsels that no further indulgence would be given for said purpose. Finally, it was made known to the court that there was no possibility of settlement as Management of NAFED was not desirous of any settlement in isolation. It wanted the entire outstanding to be cleared but it was not found feasible by accused particularly M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 6 of 15 in view of arbitration proceedings.
15 It does not seem to be in dispute that there was an agreement between NAFED and accused company. Such agreement has also been proved as Ex. CW4. It is also not in dispute that the cheque in question i.e. Ex. CW2/A dated 02.11.2005 drawn on ICICI Bank Ltd, Defence Colony branch was signed by accused Dr. S.K. Jain as authorized signatory/director of accused company. As per the cheque returning memo Ex. CW2/C, such cheque returned dishonoured on 19.12.2005 for insufficient funds. It is also evident that legal notice was duly sent and postal receipts showing dispatch of legal notice on 30.12.2005 have been proved as CW9.
16 Accused also curiously admitted, in his statement u/s 313 Cr.P.C., that he had issued the aforesaid cheque in discharge of liability. He also acknowledged that cheque returned dishonoured with remarks insufficient fund. So much so, he also owned up that he had received the legal notice.
17 This naturally, in first blush, indicates that there is no surviving issue.
18 However, as per Sh. Ranjan, cheque was not in discharge of any debt or liability. Let me now evaluate and assess whether the cheque was in lieu of discharge of any debt or liability or not?
19 I need not remind myself about the presumption envisaged u/s 139 of Negotiable Instruments Act which postulates that it shall be presumed, unless contrary is proved, that the holder had received the cheque for the discharge, in whole or in part, of any debt or other liability. Undoubtedly, M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 7 of 15 presumption is rebuttable but the accused can dislodge such presumption only by adducing cogent evidence. In Hiten P. Dalal Vs. Bratindranath Banerjee (2001) 6 SCC 16, the Apex Court inter alia observed that the statutory presumption does not preclude the person against whom the presumption is drawn from rebutting it and proving to the contrary but such evidence must be adduced before the court in support of the defence that the court must either believe the defence to exist or consider its existence to be reasonably probable, the standard of reasonability being that of the prudent man.
20 Here according to accused, he had sought permission to sell the collateral property and No Objection Certificate (NOC) was issued to him and accordingly, he found out a buyer. According to him, buyer had issued a cheque to him but since such cheque issued by such buyer Sh. Arvind Sharma was not honoured, he could not have been blamed for the dishonourment of the instant cheque.
21 Such argument is completely fallacious.
22 Firstly, grant of NOC cannot be segregated from the entire liability/alleged outstanding. Immovable property was mortgaged as collateral as a pre-condition for providing financial assistance to the accused and naturally since the accused failed to maintain financial discipline, there accrued a liability. Accused sought to clear their part liability by selling the aforesaid immovable property. A request was accordingly made vide letter dated 18.11.2005 (Ex DW-4) which too indicated that accused wanted NOC.
23 Such NOC has been proved as Ex. DW-2 and in such NOC itself, there is mention of outstanding liability of Rs. 18.38 crores (principal M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 8 of 15 amount). While granting such NOC, it was also declared in the same letter/certificate that it was being issued provided full payment of Rs. 9.16 crores was received by NAFED. NAFED also made it clear that it would not be responsible for any dispute or any act or omission between accused and such eventual buyer.
24 Be that as it may, the grant of NOC does not mean that there was any separate transaction or that same was not to be read in conjunction with financial assistance.
25 As per NOC, NAFED was hardly concerned with any alleged discord or disagreement between accused and the eventual buyer. Accused has baldly claimed that since the cheque issued by such eventual buyer could not be encashed, he could not be blamed for bouncing of cheque in question. I do not find any merit in this contention either. Firstly, the cheque in question had returned with the remarks "insufficient funds". It is not a case of stop- payment. Secondly, accused never intimated complainant not to submit the instant cheque for encashment. I am again compelled to refer to the statement made by the accused u/s 313 Cr.P.C. He merely claimed that the cheque in question was not paid since the buyer had not paid the token money. In his cross examination, accused claimed that such cheque had returned because of some technical issues. Nobody actually knows such technical issues. It has not been elaborated as to why such cheque was not paid. It seems that agreement did not go through because of some issues related to demarcation of property. Fact, however, remains that complainant cannot be penalized in this regard more so when complainant was hardly concerned with any disconsensus between accused and eventual buyer. This was specifically mentioned in the NOC itself.
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 9 of 1526 Moreover, accused did not initiate any legal action against such proposed buyer for bouncing of cheque. To say the least, even legal notice was not issued. Interestingly, such cheque issued by proposed buyer bounced on 17.11.2005 vide Memo Ex DW1/B and vide subsequent letter dated 13.12.2005, accused himself requested complainant to re-present the cheque on 16.12.2005. Acting as per his advice, NAFED re-presented cheque which returned unpaid on 19.12.2005. Thus, the fallacy in the stand of defence stands exposed to the hilt. Such cheque had nothing to do with the NOC.
27 Financial assistance had been provided to the accused and it was only at the request of accused that NOC was issued to enable him to dispose of such property so that some of the outstanding amount is paid. Undoubtedly, such collateral has not been sold till date but that does not mean that criminal liability would evaporate altogether. There is hardly anything on record which may suggest that cheque in question was only in relation to NOC and not beyond. It rather seems to me that because of some proximity in the dates i.e. date of grant of NOC, agreement between accused and eventual buyer and date of cheque that the accused is trying to dig out some unwarranted advantage.
28 It is also important to mention here that accused has been a chronic defaulter. His previous four cheques issued in the name of NAFED also met the same fate. He has availed huge financial assistance of more than Rs. 18 crores and has shown the audacity of issuing cheques, time and again, in a very nonchalant manner.
29 Indubitably, parties are already entangled in civil dispute. Arbitral Tribunal is seized with rival claims. However, in such type of matters, criminal M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 10 of 15 and civil proceedings can go hand-in-hand. Merely because an act has a civil remedy is not sufficient to denude it of its criminal outfit. Both criminal law and civil law remedy can be pursued simultaneously. As a matter of fact they are not mutually exclusive but clearly co-extensive and essentially differ in their content and consequence. It will be paradoxical to assume that when a civil remedy is available, a criminal prosecution is completely barred. If the elements of the offence under section 138 of the Negotiable Instruments Act are made out, enforcement of the liability through a civil court will not disentitle the aggrieved person from prosecuting the offender for the offence punishable under section 138 of the Act. Yes, pendency of rival claims might be a mitigating factor while deciding the quantum of sentence but accused cannot be permitted to claim complete immunity from prosecution itself.
30 Accused No.1 (S.K. Jain) was served with notice u/s 251 Cr.P.C. for commission of offence u/s 138 r.w. 142 of N.I.Act. However, notice was crystal clear. He was saddled with accusation because he had signed the cheque as authorized signatory of accused company. Accused company was also served with separate notice for offence u/s 138 N.I.Act. Learned Trial court has held them guilty u/s 138 N.I. Act only. Sh. Ranjan has attempted to dig out some advantage out of aforesaid situation. His attempt is futile as notices were very clear and moreover no prejudice has been shown caused. Such hyper-technical aspect cannot be permitted to throttle the substantial justice. As per sec 141 of N.I.Act, If the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly. Thus accused company being drawer of cheque is liable u/s 138 N.I.Act and accused S.K. Jain liable u/s 138 r.w. 141 M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 11 of 15 of N.I.Act. Inadvertent typographical error cannot stifle the justice. Thus, order of conviction is maintained albeit under said penal sections.
31 Coming to sentence, according to complainant, accused has been given appropriate sentence keeping in mind his malafide intention as various cheques issued by him on previous occasions also met with same fate. It has been stressed that NAFED is a government concern and money in question is public money and, therefore, convicts do not deserve any clemency.
32 Sh. Ranjan, on the other hand, has contended that convicts were the first to invoke arbitration and due to callous and indifferent approach of NAFED, it were accused who had to suffer huge losses and, it was not a case warranting substantive sentence. He has also drawn my attention to the fact that as per the directions contained in order dated 19.08.2011, convicts have already deposited a demand draft of Rs. 16 lacs in the court. According to him, convicts were always eager to settle the matter but NAFED had shown complete disinterest on this score. Albeit, Trial Court Record nowhere reflects that convicts had ever brought cheque amount to show their bonafide. Yes, during final arguments raised before this court, convict was found very keen to settle the matter. It can also probably because of the award of substantive sentence by the trial court.
33 Advent of cheques in the market has given a new dimension to the commercial and corporate world as modern entrepreneur prefers to carry cheque than cash. Dealings in cheques are vital and important not only for banking purposes but also for the commerce and industry and the economy of the country. Before 1988, there was no effective legal provision to restrain people from issuing cheques without having sufficient funds in their account M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 12 of 15 or any stringent provision to punish them in the event of such cheque retuning unpaid. Undeniably, process of seeking remedy through civil court is bit cumbersome and time consuming and, therefore, to ensure quick remedy, penal section was inserted in Negotiable Instruments Act, 1881.
34 This court is mindful of the fact that both the sides are already into civil litigation and arbitration has been invoked. Convict S.K. Jain is also reportedly a first offender though facing trial in other similar complaints. But, it also cannot be forgotten that NAFED had provided financial assistance of more than 18 crores to convicts and payments received, in return, is less than one crore. NAFED had been setup with an object to promote Co-operative marketing of Agricultural Produce to benefit the farmers. It happens to be an apex organization of marketing cooperatives for agricultural produce in India functioning under Ministry of Agriculture, Government of India. Several other cheques issued by accused favouring NAFED had returned dishonoured even in past. Once a cheque is written, any such drawer has to ensure that such cheque would be realized on presentation.
35 Such criminal proceedings might essentially have shade of civil liability but no economy can flourish if, during serious business transactions, cheques are issued in nonchalant and injudicious manner. Convict did not respond to the notice and never demonstrated during the trial that he was willing to settle the matter. Magisterial courts are clogged because of such cases. Court can always shower clemency and bestow compassion when accused, at the earliest available opportunity, shows his inclination to clear the dues. He cannot expect empathy at fag end after causing waste of precious judicial hours.
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 13 of 1536 Thus while maintaining the sentence awarded to convict company, the sentence given to convict S.K. Jain by learned Trial court is modified. He now stands sentenced as under:-
i) Simple imprisonment for two months.
ii) Simultaneously, he would pay Rs. 24 lacs as compensation to
NAFED u/s 357(3) Cr.P.C. Such amount would be deposited by him before the learned Trial court within six weeks from today. Learned Trial court would then take requisite steps for refunding the same to NAFED.
iii) In case of non-payment of compensation, convict S.K. Jain would undergo simple imprisonment for a period of six months and his liability to make payment will not vanish even after serving such default sentence and such amount would be recoverable as per sec 421(1)(b) read with sec 431 of the code. This is to ensure that substantive justice is done and complainant gets back its dues.
iv) Such realization of compensation would not also trim down the claim of NAFED against the convicts in relation to arbitral proceedings.
37 Convict S.K.Jain be taken into custody to serve the sentence. He be sent to jail under appropriate warrants.
38 Fine of Rs. 10,000/- as imposed on convict company, if not deposited already, be deposited before Trial court within 10 days. In case not paid as directed, it would be recoverable as per sec 421(1)(b) of the code.
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 14 of 1539 Appeal stands disposed of accordingly. The draft of Rs.16 lacs which the convict had submitted at the time of admission of Appeal be returned to convict Dr. S.K. Jain. A copy of judgment with TCR be sent back to learned Trial Court for necessary action.
40 A copy of judgment be given to convicts free of cost.
41 Appeal file be consigned to Record Room.
Announced in the open court (MANOJ JAIN)
On this 4th day of June 2014 ASJ/Special Judge (PC Act) (CBI)
South Distt: Saket Courts: New Delhi
M/s Reliance Polycrete Vs NAFED Criminal Appeal No. 02/2014 Page 15 of 15